Pakistan 

Pakistan country policy

Policy established 20 August 2009

• The country ceiling is 30 mln euro
• Early warning signal 30 mln euro
• - of which was used as at 2011-06-30 33 mln euro
• Private buyers: SIF facility

Country class: 7

Pakistan country facts

Atradius DSB Economic Research
Country Report last updated :  8 October 2009

Country :  PAKISTAN 

Political Situation
Increasingly Unstable

Head of state
President Asif Ali Zardari , PM Yousaf Raza Gillani.

Form of government
Government of a coalition in which PPP is the largest. 

Internal Economic Situation
Stagnation

General situation
Pakistan narrowly escaped a balance of payment crisis in November 2008. Structural current account deficits, low liquidity and capital flight almost resulted in default, but the country was rescued by an IMF package (SBA $11.3 bln)  The textile sector suffers from the steep fall in demand due to the global recession and economic growth is forecasted at only 2% this year. Inflation, although falling, continues to undermine purchasing power. Due to falling imports the current account deficit is shrinking, but still a significant financing gap has to be financed by loans and FDI. Pakistan’s political uncertainty and the changed risk perception of investors will make this very challenging. The IMF has disbursed a second tranche in spite of poor performance on structural reforms. 

External Economic Situation
Poor Liquidity Situation

Main sources of foreign exchange
Exports of textiles (23%), remittances of Pakistani workers abroad, rice (5%).

Main foreign markets
EU (30%, UK 7%, Germany 5%), US (20%), UAE (11%), Afghanistan (9%), China (6%).

Main expenses of foreign exchange
Machinery (19%), chemicals (13%), fuels (25%), palm oil (5%).

Balance of payments 
Thanks to dramatically falling imports the trade deficit is shrinking. However disappointing remittances could lead to a larger than expected current account deficit. Total balance is negative resulting in decreasing forex reserves.
External economic situation
IMF package has rescued Pakistan from default, however several downside risks remain present.